2. OBBBA Implementation Is the Biggest Item on the Agenda

OBBBA introduces Medicaid work requirements and more frequent eligibility checks and places new limits on provider taxes and state-directed payments, offset in part by a $50 billion rural health fund. Policy analysts expect the changes to reduce Medicaid coverage over time, and Barkett noted that 2026 is likely to be the first year in roughly 15 to 20 years that the US uninsured rate rises.

“A whole cohort of people who lead providers in their management teams has not been managing in an environment where an uninsured rate is going up for nearly a generation of these leaders,” he said.

The Congressional Budget Office estimated the law cuts federal Medicaid spending by about $911 billion from 2025 to 2034 and leaves 7.5 million more people uninsured, with work requirements alone accounting for more than 5 million of that increase by 2034, according to KFF.⁵ Work requirements take effect January 1, 2027, or earlier, in 44 states and Washington, DC, and KFF notes the $50 billion rural fund will not offset an estimated $137 billion in rural Medicaid reductions.

How states implement the law, and whether Congress amends it, is “the biggest ticket item” for the next 2 years, he said, noting that major laws such as the Affordable Care Act and Medicare were amended within a few years of passage. Brueggeman cautioned before the vote that a divided government with a president willing to veto would make it hard to undo large parts of OBBBA, so “providers shouldn’t really plan on relief coming from Washington.”

After the vote, he said he does not expect any reversal before Medicaid work requirements begin January 1, because the new Congress is not seated until January 3. Any earlier change would require a deal between the outgoing Congress and the president.

“Once seated, Democrats can push for changes, but passing a bill modifying significant portions of an important piece of President Trump’s legislative legacy and getting it signed by him are different things,” Brueggeman said.

A targeted delay or negotiated coverage package is more likely than a broad repeal but would likely come with conditions from the administration, he said. Even reconciliation does not remove the presidential veto, and Democrats lack a veto-proof majority without some bipartisan support in both chambers.

Until then, he said, hospitals should keep their planning assumptions aligned with current law unless an actual change or approved delay says otherwise. BRG is advising clients to strengthen Medicaid eligibility screening, including presumptive eligibility where available; help eligible patients document exemptions and stay enrolled; bolster financial counseling and revenue cycle processes; review financial assistance policies; and model the impact on net revenue and cash flow.

“Patients do not stop needing care when they lose coverage,” he said.

3. Health Systems Could Face 2% to 3% Margin Compression on Already Thin Margins

Nearly 3 out of 4 hospital chief financial officers (72%) report operating margins of 2% or less, according to a LeanTaaS survey of 100 finance leaders.⁶ The combined pressures, including OBBBA, could compress margins by another 2% to 3%, said David Wildebrandt, a managing director in BRG’s Healthcare practice who works with academic medical centers and integrated delivery networks. He described the law as a “dual threat” that cuts into both financing and reimbursement while shifting patients from Medicaid, already a difficult payer mix, into self-pay.

On top of that, systems face reduced ACA subsidies, threats to 340B savings, and site-neutral payment proposals. His recommendations:

• Build a financial exposure plan. Model payer mix, charity care, and uncompensated care at the market level, because the impact “is different for every hospital.”
• Protect eligible patients early. Stand up outreach to help patients document work requirements and keep coverage ahead of January 2027.
• Find another 5% to 7% in costs. Look beyond labor and supply chain through a transformational roadmap rather than a single initiative.
• Lean on integrated care models. Partner with federally qualified health centers and community organizations to steer patients away from high-cost emergency department (ED) and inpatient settings.

Those cost cuts will be structural. Wildebrandt said many systems are rationalizing service lines, consolidating redundant obstetrics units, pediatric intensive care units, and post-acute rehab programs into centers of excellence, a shift he acknowledged “will decrease access.” Medicaid losses could also indirectly cost some hospitals their 340B eligibility: as Medicaid inpatient days shift to self-pay, hospitals hovering just above the eligibility threshold could fall below it, which he called “a significant blind spot.”

Barkett does not expect the election to move 340B, which “hasn’t changed much because of any election for nearly 2 decades.” Three 340B reform bills were introduced in Congress this year, but congressional leadership has not prioritized the issue. He has expected a site-neutral payment law for the last 3 Congresses but said it may instead surface as part of a larger deficit-reduction package or as a way to offset other spending.

Barbarito said the stakes of the 340B fight are shifting.

“The 340B debate is no longer just about drug discounts. It’s increasingly about who controls where medications are dispensed—and whether patients can continue to access care through the pharmacies they rely on,” he said.

4. Payer-Provider Tension Is Rising, and States Are Joining the Negotiating Table

With Medicaid generally paying below cost and Medicare margins at about −12% in 2022 according to a 2024 Medicare Payment Advisory Commission (MedPAC) report,⁷ providers are pushing for outsized commercial rate increases to offset losses, Brueggeman said. Employer premiums are climbing too; the average annual family premium reached $26,993 in 2025, up 6%, according to KFF.⁸ But a 6% premium increase “doesn’t necessarily mean the hospital received a 6% increase,” he said.

“The negotiations used to get worked through outside of the public view, but now they’re increasingly contentious,” Brueggeman noted. “Two sides less aligned than I’ve seen in many, many years.”

More systems are preparing to go out of network, and BRG’s termination-planning work has seen “explosive growth,” he said. States are also reshaping contracting. California, Massachusetts, Indiana, and Vermont are creating statewide health care spending growth targets and sometimes caps, Brueggeman said. In Washington, Public Employees Benefits Board and School Employees Benefits Board plans will cap inpatient and outpatient hospital payments at 200% of Medicare and set a 150% of Medicare floor for community-delivered primary care and behavioral health, starting January 1, 2027.⁹

Those targets widen the gap at the table. Massachusetts, for example, has a statewide cost growth target of about 3.6%, while provider labor and supply trends there run closer to 5% to 6%, Brueggeman said. At the same time, providers are hesitant to take on shared risk arrangements, once a release valve in negotiations, because they cannot predict how OBBBA, the expiration of enhanced subsidies, and Medicare Advantage market moves will shift their patient mix. Many systems are also narrowing their Medicare Advantage network participation, creating what he called “a bit of a perfect storm.”

5. Health Systems Are Preparing for Coverage Losses That Will Still Bring Patients to the ED

People who lose coverage will still need care, and health system executives at the roundtable expect more of them to turn to EDs as their conditions worsen, creating longer waits and capacity pressure for insured and uninsured patients alike. Systems are responding by tracking coverage and ED use trends, expanding clinic access to address needs earlier, and building long-term financial plans alongside their strategic plans. They are also tightening eligibility, authorization, denial, and collection processes and setting decision triggers for when to adjust capacity or resequence investments before the pressure becomes a crisis.

Reimbursement is not expected to keep up with costs, and executives said systems cannot cut their way back to profitability. Many already hold salary, wage, and benefit costs below 45% of net patient service revenue, compared with roughly 60% considered appropriate 15 years ago. Next steps include shifting care to lower-cost ambulatory settings, using scale in negotiations with payers and states, and, at times, going out of network with Medicare Advantage plans. Weaker margins threaten access in urban, suburban, and rural communities alike, and make it harder to recruit specialists to rural areas.

References

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8. 2025 Employer Health Benefits Survey. KFF. October 22, 2025. Accessed November 3, 2026. https://www.kff.org/health-costs/report/2025-employer-health-benefits-survey/
9. Public employee access and affordability fact sheet. Washington State Health Care Authority. Accessed November 3, 2026. https://hca.wa.gov/assets/program/pebb-sebb-access-affordability-fact-sheet.pdf